BA225 Managerial Accounting: Week 5 Assignment (BE7-1, BE7-2, E7-1, E7-4, E7-9)

BA225 Managerial Accounting
Week 5 Assignment

What factors must management consider when deciding whether to continue using an asset, repair, or replace it?

BE7-1The steps in management's decision-making process are listed in random order below. ___ Make decision ___ Identify the problem and assign responsibility ___ Review results of decision ___

Determine and evaluate possible courses of actionIndicate the order in which the steps should be executed. B

E7-2 Bogart Company is considering two alternatives. Alternative A will have revenues of $160,000 and costs of $100,000. Alternative B will have revenues of $180,000 and costs of $125,000.

Compare alternative A to B showing incremental revenues, costs, and net income.

E7-1 Ortega has prepared the following list of statements about decision- making and incremental analysis.
1. The first step in management's decision -making process is, " Determine and evaluate possible courses of action".
2. The final step in management's decision-making process is to actually make the decision.
3. Accounting's contribution to management's decision-making process occurs primarily in evaluating possible courses of action and reviewing the results.
4. In making business decisions, management ordinarily considers only financial information because it is objectively determines.
5. Decisions involve in a choice among alternative courses of action.
6. The process used to identify the financial data that change under alternative courses of action is called incremental analysis.
7. Costs that are the same under all alternative courses of action sometimes affect the decision.
8. When using incremental analysis, some costs will always change under alternative courses of action, but revenues will not.
9. Variable cost will change under alternative course of action, but fixed cost will not.

Instructions Identify each statement as True or False. If false indicate how to correct statement.

E7-4 Klean Fiber Company is the creator of Y-go, a technology that weaves silver into its fabrics to kill bacteria and odor on clothing while managing heat. Y-Go has become very popular as an undergarment for sports activities. Operating at capacity, the company can produce 1,000,000 undergarments of Y-Go year. The per unit and total costs for an individual garment when the company operates at full capacity are as follows. Per Undergarment Total Direct materials 2.00 2,000,000 Direct labor 0.75 750,000 Variable manufacturing overhead 1.00 1,000,000 Fixed manufacturing overhead 1.50 1,500,000 Variable selling expenses 0.25 250,000 Total $5.50 $5,500,000 The U.S. Army has approached Klean Fiber and expressed an interest in purchasing 250,000 Y-Go undergarments for soldiers in extremely warm climates. The Army would pay the unit cost for direct materials, direct labor, and variable manufacturing overhead costs. In addition, the Army has agreed to pay an additional $1 per undergarment to cover all other costs and provide a profit. Presently, Klean Fiber is operating at 70% capacity and does not have any other potential buyers for Y-Go. If Klean Fiber accepts the Army's offer, it will not incur any variable selling expenses related to this order.

Instructions: Using incremental analysis, determine whether Klean Fiber should accept the Army's offer.

E7-9 Rachel Rey recently opened her own basket weaving studio. She sells finished basket in addition to the raw materials needed y customers to weave baskets of their own. Rachel has put together a variety o raw material kits, each including materials at various stages of completion. Unfortunately, owing to space limitations, Rachel are unable to carry all varieties of kits originally assembled and must choose between two basic packages. The basic introductory kits include undyed, uncut reeds ( with dye included) for weaving one basket. This basic package costs Rachel $14 and sells for $30. The second kit, need only soak the reeds and weave the basket, Rachel is able to produce the second kit by using the basic materials included in the first kit and adding one hour of her won time, which she values at $18 per hour. Because she is more efficient at cutting and dying reeds that her average customer, Rachel is able to make two kits of the dyed reeds, in one hour, from one kit of undyed reeds. The stage 2 kit sells for $35. Instructions: Determine whether Rachel's basket weaving shop should carry the basic introductory kit with undyed and uncut reeds or the stage 2 kit with reeds already dyed and cut.

Prepare an incremental analysis to support your answer. Sell Basic Kit Process Further to Stage 2 Kit Net Income Increase / (Decrease)
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